Export control classification, or ‘rating’ as it is more commonly referred to in the UK, is seen by many as an arcane practice and is often neglected by companies, to the point where the export control classification work required to build an effective compliance plan becomes the major obstacle preventing the company from carrying out the necessary work.

Export control classification may be arcane but no more so than many other areas of technical industries. It is certain though that export control classification is the foundation stone of any effective export control compliance programme. It is the sine qua non of compliance, regardless of which jurisdiction is concerned. If the export control classification, in the case of US export controls including the commodity jurisdiction, is incorrect, then all subsequent decisions relating to that product or item will also be incorrect.

Why do companies shy away from export control classification? There are any number of reasons but the main drivers seem to be:

• Export control classification is poorly understood by non-practitioners

• The export control environment is becoming increasingly risky for companies

• Such companies tend to recognise this risk increase late in the day

• Late recognition means that there is a significant backlog of export control classification work required in order to develop an export control compliance plan for the company

• The magnitude of the export control classification task itself becomes a block to taking the necessary action. If you don’t tidy the garden, it keeps getting worse until you do, it does not stand still and wait for you!

• The default position, despite the increasing risk, becomes, “Well, we haven’t been caught yet – it will probably be OK”

Why is it not a good idea for companies to take this approach to export control classification?

• Because export control classification help is available

• Because breaching export controls is a criminal offence

• Because over time it becomes increasingly likely that evidence will exist within the company, particularly in e-mails, which would help a prosecutor to establish the intent element necessary to prove the more serious criminal offences

Trying to build an export control compliance system for a company without carrying out an effective export control classification exercise is the equivalent of erecting a frame tent without the frame and the system is likely to stand for a comparable period of time. A compliance system should demonstrate due diligence in the prevention of export control breaches. A system built in this way can be argued to demonstrate the opposite: recognition of the existence of a problem followed by a wholly inadequate response. This is uncomfortably close to meeting the definition of recklessness.

Part of the danger inherent in export control classification, especially in an EU/US context, is the perceived similarity between the respective control lists. Whilst this can be of assistance, it should not be overlooked that the lists are not the same and neither are the policies underpinning what goods, software, technology and services are contained in what list. This though is perhaps better left for separate consideration.
The company was established to provide rapid, professional advice and assistance to companies currently affected by export controls or who are considering entering the market place but are unsure of the commercial and regulatory implications.